Children

07/30/2018

What if parents at retirement age, insist on transferring their assets under their children’s name to avoid estate taxes when they pass away? If they have a primary home, an investment property, and savings accounts that total south of $1 million, are there really any tax advantages to making the changes?

Seniors frequently transfer assets to their children to be eligible for Medicaid, avoid probate, and eliminate estate and inheritance taxes. In New Jersey, until this year, residents were potentially subject to three taxes at death: the federal estate tax, the New Jersey inheritance tax, and the New Jersey estate tax. In 2016, and for the 15 years before that, the New Jersey estate tax was imposed on transfers to children, only if the total estate exceeded $675,000. In 2017, that amount was increased to $2 million. Beginning in in 2018, the New Jersey estate tax was repealed.

There is also the inheritance tax in New Jersey, which wasn’t repealed. That tax is only imposed upon inheritances by individuals other than “Class A” beneficiaries. A spouse, child, grandchild, and parent all qualify as “Class A' beneficiaries.” If the child in this example inherits those assets from his parents, there would be no New Jersey inheritance tax. The federal estate tax is not an issue, because it doesn’t apply until an estate exceeds $11.18 million (or $22.36 million for a couple).

There could be significant harm in making the transfers now rather than waiting for the parents’ deaths. The tax basis of any asset held until death, is stepped-up to fair market value. Therefore, if the parents owned the property for many years, paid significantly less than it is worth today, and the building has been completely depreciated, then their tax basis is probably significantly lower than the fair market value. However, if it were sold today, there would be a significant capital gains tax to be paid. That’s the difference between the sales proceeds received and the owners’ tax basis.

If parents gift the property to the children during their lifetimes, then the kids take the property with a carry-over basis—they’d have the same basis the parents had and would have the same capital gains tax due when sold. However, if the parents hold on to the investment property until their deaths, the children inherit the property with a stepped-up basis. The children could sell the property the next day and completely avoid any capital gains tax. Another option is to hold on to the property after the parents' death and begin to depreciate the building again to decrease any taxes the kids would pay on any rental income. It works the same way for the parents’ primary residence.

Don’t allow parents to make these kinds of decisions, without speaking to an experienced estate planning attorney in your state. They will know the long and short-term tax consequences and help the family plan properly.

One of the main goals of our law practice is to help families like yours plan for the safe, successful transfer of wealth to the next generation. Call our office today to schedule a time for us to sit down and talk about your estate plan, where we can identify the best strategies for you and your family to ensure your legacy of love and financial security. Our office is located in Santa Ana, CA but we serve all of California including Irvine, Orange, Tustin, Newport Beach, and Anaheim.

07/28/2018

In many U.S. families, children and parents are going to be switching roles. As parents age, they’re becoming their own kids’ children in many ways, requiring time and care, as well as sometimes creating a financial burden, says Fox Business in the recent article, “Aging parents are the new ‘children.’”

One concern is that aging parents can lose their mental abilities. The Alzheimer’s Association says that every 65 seconds, someone in the U.S. develops the disease. It’s now the sixth-leading cause of death. This can create additional long-term care needs for parents and result in an emotional and financial burden on adult children.

Parents with physical limitations may have difficulties living independently. Therefore, you should understand your parents’ long-term plans and how they will impact you. Let’s examine some of the things you can do, as your parents go through the aging cycle.

Family Conversations. While talking to your parents about these topics now may be uncomfortable, it will save you a lot of stress, time and money in the future. Parents who want to preserve autonomy should express their wishes. Parents should discuss their healthcare wishes, the what ifs and finances now to discover what options they may have for care. It’s important that adult children understand details of their parents’ financial situations, before they’re unable to communicate due to incapacity or death.

Get the Family Affairs in Order. Create a system to help with gathering information. This should include medical histories and estate plans. Start to organize information with your parents as early as possible. Adult children should be sure that their parents have a will, a trust (or both), a durable power of attorney for property and a durable power of attorney for healthcare.

Determine Parents’ Long-Term Financial Needs. It’s extremely expensive to provide care for aging parents. Seek professional guidance to determine how much of your parent’s savings is currently allocated to pay for healthcare in retirement, not covered by Medicare. Look at long-term care insurance.

Be Involved. As parents age, look for signs of anything that might be amiss. If you aren’t near your parents physically, or perhaps need additional assistance, you may want to get someone to help you with the care management of your parents. An aging-care support person can go with your parent(s) to doctors’ visits, act as liaisons with care facilities and provide you with regular reports.

One of the main goals of our law practice is to help families like yours plan for the safe, successful transfer of wealth to the next generation. Call our office today to schedule a time for us to sit down and talk about your estate plan, where we can identify the best strategies for you and your family to ensure your legacy of love and financial security. Our office is located in Santa Ana, CA but we serve all of California including Irvine, Orange, Tustin, Newport Beach, and Anaheim.

07/27/2018

Many people think that having an estate plan just means drafting a will or a trust. That is not true. There’s much more to add to your estate planning to be sure that all of your assets are transferred efficiently to your heirs, when you pass away.

Investopedia’s recent article, “6 Estate Planning Must-Haves,” provides a list of items that every estate plan should have. This includes a will (and perhaps a trust), a durable power of attorney, up-to-date beneficiary designations, a letter of intent, a healthcare power of attorney and guardianship designations.

Let's take a look at each item on the list to see if you’ve left any decisions to chance.

Wills and Trusts. This should be one of the main elements of every estate plan—even if you don't have substantial assets. Wills are documents that make certain property is distributed, according to your wishes (if drafted pursuant to state laws). Some trusts also help limit estate taxes or legal issues. But this isn’t enough. The wording of these documents is extremely critical: a will or trust should be written in a way that’s consistent with the way you've bequeathed the assets that pass outside of the will. In California, if the gross value of your estate exceeds $150,000, it could be subject to probate.

Durable Power Of Attorney. A durable POA authorizes an agent of your own choosing to act on your behalf, when you’re unable to do so for yourself. Without a power of attorney, a judge may have to decide what happens to your assets, if you’re found to be mentally incompetent. That ruling may not be what you wanted. A POA can give your agent the power to transact real estate, enter into financial transactions and make other legal decisions in your stead (as if he or she were you). This POA is revocable by the principal at a time of his or her choosing, typically at a time when the principal is deemed to be physically able, mentally competent or upon death.

Beneficiary Designations. Some assets can pass directly to your heirs, without being dictated in the will (like a 401(k) plan). Therefore, it’s important to have an up-to-date beneficiary, as well as a contingent beneficiary, on these types of accounts. If you fail to designate a beneficiary, or if the beneficiary has passed away or is unable to serve, a judge may decide what to do with your funds. This again may not be what you wanted.

Healthcare Power of Attorney. This appoints another individual (usually a spouse or family member) to make important healthcare decisions on your behalf, in the event of incapacity. If you’re thinking about creating such a document, you should select someone you trust, who shares your views and who would likely recommend a course of action with which you’d agree. A backup agent should also be named, if your initial pick is unavailable or unable to act at the time needed.

Guardianship Designations. If you have minor children or are considering having kids, choosing a guardian is very important and many times is overlooked. Be sure the individual or couple you choose shares your views, is financially sound and is willing to rear your children. You should also add a contingent guardian. Without these designations, a judge could rule that your kids should live with a family member you wouldn't have wanted, and in some cases, the court could require that your children become wards of the state.

As you can see, a will is a great start, but it's just the beginning.

One of the main goals of our law practice is to help families like yours plan for the safe, successful transfer of wealth to the next generation. Call our office today to schedule a time for us to sit down and talk about your estate plan, where we can identify the best strategies for you and your family to ensure your legacy of love and financial security. Our office is located in Santa Ana, CA but we serve all of California including Irvine, Orange, Tustin, Newport Beach, and Anaheim.

07/26/2018

Too many estate plans are created and then quickly forgotten, put on a shelf, and never looked at again. While we do recommend that you review and update your plan at least every three years, no matter what happens in your life, your plan must be updated immediately in the event of any of these seven life events.

Marriage

Getting married is the joining together of two lives. Your plan must address and account for your new legal status. Naming your spouse as a beneficiary on your insurance policies, updating your will and/or trust, and including him or her in the determination of how your financial and medical decisions will be made, if you cannot make them for yourself, are all critical steps to take after marriage.

Divorce

When you begin the process of getting divorced, you also must update your estate plan, unless you continue to want your future ex-spouse to receive your assets, and make financial and medical decisions for you, if you cannot.

Once your divorce is complete, you may have an entirely new asset profile to plan for now that you know what you own, what your ex-spouse owns and how you hold title to your assets, so it’s time to update your estate plan.

Births and adoptions

Providing for the care and custody of your child in the event of your death or incapacity is paramount in your estate plan. That means naming guardians for your new child, both long and short-term, with a Kids Protection Plan® is a must. And, if you have not already done so, you’ll definitely want to consider setting up a trust for your child, to receive the assets you will be leaving behind.

Deaths

The death of a loved one die is never easy. And when they were a part of your estate plan, their death should prompt a review of your own plan sooner rather than later. You may need to name new beneficiaries, find a new person to hold Power of Attorney, update your health care directive, or identify new guardians for your children. This should not be put on the backburner.

Sickness

If you are in the midst of an illness, you may want to revisit who you have chosen to make medical decisions for you, in the event that you cannot, and how you want those decisions to be made.

MovingWhen you move to a new State, have a lawyer review your estate plan to ensure your documents will still operate as you desire. . Some documents may need to be revised and you will certainly want to ensure any new real estate you acquire in your move is accounted for and properly transferred into your plan.

New Assets Acquired

More money means more problems, but only if you don’t plan well. Revisit your estate plan each time you change investment accounts, inherit any assets, acquire new property or other investments, or start or sell a business. Most plans fail because they do not take into account all of the assets owned by the person who died.

If you are anticipating or have recently experienced one of these major life events, contact us. It’s time to update your plan.

One of the main goals of our law practice is to help families like yours plan for the safe, successful transfer of wealth to the next generation. Call our office today to schedule a time for us to sit down and talk about your estate plan, where we can identify the best strategies for you and your family to ensure your legacy of love and financial security. Our office is located in Santa Ana, CA but we serve all of California including Irvine, Orange, Tustin, Newport Beach, and Anaheim.

07/25/2018

Young families face different estate planning needs and challenges than those who have had a long life behind them. While established families may be concerned about what will happen to their family when they pass on, young, growing families can be more focused on what is happening to their family in the present. And you even may find it hard to justify planning for an “estate” you haven’t yet established!

But here’s the thing … if you have children, or anyone else you care about, you may not have an “estate,” but you do need estate planning, if you want to ensure your loved ones wouldn’t be stuck in Court and/or conflict, if anything happens to you.

Here are a few estate-planning issues important for young couples to consider as soon as they start a family:

The Care and Custody of Your Children

If you die or become incapacitated before your children reach 18, they will need a legal guardian. To ensure your children are only ever in the care of people you want and choose, you need to name both temporary and long-term guardians for your children.

Identifying friends or family as the “godparent” of your child isn’t enough. You need to legally document your choice. And, naming just one person or a couple won’t cover it either. Name at least 3 options, in case back-ups are needed.

Also, ensure that you have not just named legal guardians in your Will, for the long-term.

If something happens to you and your child is home with a babysitter, or at school, you want to also name local people, friends, or family, who would immediately be able to be called upon by authorities. And, those people need to have legal documentation on hand to step in and make immediate, short-term decisions for your littles.

We recommend a comprehensive guardian nomination to ensure there are no gaps, for even a minute, in the care of the people you love most.

The Management of Your Children’s Inheritance

Remember, when you die, the assets left to your minor children will need to be managed by someone at least until they turn eighteen. If no one is identified for this task, the court steps in and appoints “professionals” to take over the role, which can cost your children their entire inheritance.

And, it’s totally unnecessary. With just a bit of prior planning, you can keep your loved ones out of the Court system entirely and give total control to the people you know, love, and trust.

The Authority to Make Decisions for You

Finally, no matter what your age is, or how big or small your assets are, you want to put in place the documentation that appoints the people you would want making decisions for you, if you cannot make your own decisions.

Once again, the focus here is on keeping the people you love out of Court during what would be a hugely stressful time for them.

Estate planning is a key part of growing up, and showing up for the people you love. So, yes, you may be a young family, but once you’ve become a family, you’re not too young to plan well to make things as easy as possible for the people you love.

We will help you make the very best financial and legal decisions throughout your life, and for the beyond. Far from being a morbid task, estate planning can give your young family the peace of mind, confidence, and security you desire when it comes to the future well-being of all members of your family.

One of the main goals of our law practice is to help families like yours plan for the safe, successful transfer of wealth to the next generation. Call our office today to schedule a time for us to sit down and talk about your estate plan, where we can identify the best strategies for you and your family to ensure your legacy of love and financial security. Our office is located in Santa Ana, CA but we serve all of California including Irvine, Orange, Tustin, Newport Beach, and Anaheim.

07/23/2018

Simply put, a trust is just a vehicle used to transfer assets. According to a recent article at The Motley Fool, Trust Funds: They're Not Just for the Rich, and You Might Need One, trusts are especially useful for parents of minor children as well as those who wish to spare their beneficiaries the hassle of going to Court in the event of their incapacity or death.

And why would you want to keep your family out of court (known as avoiding probate)? Perhaps you’d like to keep private the details of the assets you are leaving your heirs. Leaving assets via a will that must go through probate to go into effect makes your estate a matter of public record. A trust is a private document and distributes assets upon your death without the need for probate, which can tie up assets for a long period of time in court.

The court process can take longer than is necessary and keep your family from getting access to your assets as quickly as they want or need them.

If you have minor children, you need to create a trust in order to leave your assets to them since minors cannot inherit directly. You will want to name a trustee to manage those assets for your children. Even if your children are adults, a trust can help protect assets you leave for them from creditors, legal judgments, divorce, or even their poor money management habits.

You can even establish a trust for yourself in case you become incapacitated and cannot manage your own finances at some future time. The trust assets are managed by a successor trustee, which avoids the need for a court-appointed conservator if you become incapacitated.

Trusts are also wonderful tools for those who are members of a blended family. If you are remarried and have children from a previous marriage, you can provide for your current spouse while ensuring your assets pass to your children from another marriage using a by-pass trust. With this kind of trust, the assets will pass to your children free of estate tax upon the death of your surviving spouse.

One of the main goals of our law practice is to help families like yours plan for the safe, successful transfer of wealth to the next generation. Call our office today to schedule a time for us to sit down and talk about your estate plan, where we can identify the best strategies for you and your family to ensure your legacy of love and financial security. Our office is located in Santa Ana, CA but we serve all of California including Irvine, Orange, Tustin, Newport Beach, and Anaheim.

07/19/2018

Even if you do not have an estate plan that you’ve created, the State has one for you. And it’s likely one you won’t like. It may be time for you to review the plan the State has for you and make more informed, empowered choices for your family.

If you have created an estate plan with a lawyer, or on your own, it may be time for a review and an update.

Estate planning is simply not something you do once, set it, and forget it. In the same way your life, the law and your assets change, your estate plan must change as well.

Far too many people spend thousands of dollars on a plan, only to have it sit on a shelf getting stale, and then end up leaving their family with a huge mess they thought they had invested time and money to prevent.

Don’t let this be the case for your family. Your family is worth more than that.

At bare minimum, your plan should be reviewed every three years. We do recommend that your listing of your assets be updated annually. You may want to check to make sure you even have an asset inventory included with your plan. Most plans don’t have this included.

Unfortunately, most lawyers (and every do it yourself) system overlooks this and there are Billions of dollars in our State Departments of Unclaimed Property as a result.

In addition to the minimum review every three years, your plan needs to also be reviewed in the event of any of these life changes:

significant changes in the value of your estate;

changes in your “income level or requirements,” such as retirement;

an out of state move;

job changes;

changes to family situations, such as births, marriages, deaths, and major illnesses;

changes to business interests;

significant purchases or payoffs;

major changes in insurance coverage; and

the death or major illness of someone named as your executor, trustee, power of attorney, or child guardian.

One of the main goals of our law practice is to help families like yours plan for the safe, successful transfer of wealth to the next generation. Call our office today to schedule a time for us to sit down and talk about your estate plan, where we can identify the best strategies for you and your family to ensure your legacy of love and financial security. Our office is located in Santa Ana, CA but we serve all of California including Irvine, Orange, Tustin, Newport Beach, and Anaheim.

07/18/2018

If you are a single parent, life for you right now probably couldn’t get any busier. You are likely being pulled between work, school activities, sports teams, and the inevitable emergencies that fill the lives of single parents everywhere.

Being a single parent is a huge responsibility. You may have taken it on willingly or not but your children’s lives are now largely in your hands. So what would happen to them if something happened to you? Who would take care of them? Who would pay for their housing and food? Who would pay for their education? These are questions you need to get answered, and the best way to do that is through estate planning.

Having an estate plan that covers the care of your children in case you should die suddenly or even become incapacitated provides welcome peace of mind for the single parent. Here are the elements that can help you:

Will. A will lets you name the person responsible for your estate as well as who will inherit your assets. Most importantly is the legal vehicle you use to name a guardian for your children, without a will, the state will decide their fate.

Revocable Living Trust. There are so many benefits of a living trust for single parents. First, a trust enables you to still control your assets while you’re able, but if you die or become incapacitated, it transitions that decision-making authority immediately to the person you have named as your trustee (obviously someone you can trust and count on to do what you would have wanted). If your children are still minors or even young adults their inheritance can be handled for them until the time comes when they are capable (and you decide that time). Plus, if you have a trust, your estate doesn’t have to go through probate, which can be costly and time-consuming. Also probates are not the best idea if your children need to continue living in their home and having their expenses paid.

Durable Power of Attorney. As a single parent, you are likely the only signatory on your mortgage, your bank accounts, and other financial instruments. What would happen if you became incapacitated and there was no one to pay the mortgage or the bills? That is why it is important to have a durable power of attorney in place. When choosing your power of attorney, it should be someone you trust managing your financial affairs, while also make legal decisions on your behalf if you are unable to do so.

Advance Medical Directive. An advance medical directive gives you the legal power to have someone you select make your health care decisions in case you are not capable of doing so yourself.

Beneficiary Forms. Your life insurance policy, retirement accounts, and brokerage accounts all require beneficiary designations. Those you designate to receive the assets in these accounts will only receive them if you execute the proper beneficiary forms! They cannot pass to your heirs via a will or trust. And minor children should never be named as beneficiaries as they are not legally able to own assets. Talk with us about strategies to leave these assets to your children without court intervention.

Guardian Nomination. A guardian nomination provides single parents with the legal planning tools they need to make sure there is never a question about who will take care of your kids if you are in an accident.

One of the main goals of our law practice is to help families like yours plan for the safe, successful transfer of wealth to the next generation. Call our office today to schedule a time for us to sit down and talk about your estate plan, where we can identify the best strategies for you and your family to ensure your legacy of love and financial security. Our office is located in Santa Ana, CA but we serve all of California including Irvine, Orange, Tustin, Newport Beach, and Anaheim.

07/17/2018

The term “blended family” has become commonplace in our society and refers to a family where one or both spouses were previously married and have children from the prior marriage. In some instances, the new couple goes on to have children of their own. With children, stepchildren and ex-spouses involved, estate planning can get quite complex.

When you are trying to take all the different interests involved with your blended family into account, you need help to ensure you provide for everyone adequately. And to ensure you avoid conflict after your death or incapacity, as that’s quite common in blended family situations.

Without a well-crafted estate plan to establish how you want your surviving spouse and children to receive your assets, the distributions made pursuant to the law (or a poorly drafted plan) could lead to tremendous conflict among your loved ones and significant unintended consequences. . To create a comprehensive estate plan that achieves the results you want, it is imperative that you consult with an experienced lawyer.

Deciding how to divide your wealth and assets between your surviving spouse and your biological children can be difficult. If you are close with your stepchildren or you have adopted them, you must take their interests into account as well. This means that you may need to address issues such as child custody and support once you are gone. You will also want to avoid mistakes such as:

Your children’s inheritance being postponed until your spouse dies (that’s often the fastest path to family conflict)

Your ex-spouse making a claim on your estate

Family fighting or litigation over your estate or to gain the authority to act

With so many issues to consider, it is necessary to make these decisions while you are healthy and you have the time to create the best strategy for drafting your estate plan whether you have a lot of money or not. If you want to take action to protect your blended family, contact us to schedule an appointment. Let us help minimize the chance of family conflict and ensure your wishes are carried out when you are gone.

One of the main goals of our law practice is to help families like yours plan for the safe, successful transfer of wealth to the next generation. Call our office today to schedule a time for us to sit down and talk about your estate plan, where we can identify the best strategies for you and your family to ensure your legacy of love and financial security. Our office is located in Santa Ana, CA but we serve all of California including Irvine, Orange, Tustin, Newport Beach, and Anaheim.

07/15/2018

If you have grandchildren - or are getting ready to welcome one, you know the special joy they bring. After all, you can now leave all the heavy lifting to the parents and just enjoy connecting with them.

Many grandparents who enjoy financial freedom are often more than generous to grandchildren. And some even wish to see their grandchildren enjoy an inheritance now instead of waiting to pass along assets after they are gone. If that’s you, here are 7 things you should think about before you make gifts to grandchildren.

Clarify the gift. Most grandparents gift outright, no strings attached. But if you think you are providing a loan or an advance on an inheritance, you need to clarify that in writing.

Equal treatment. It is not unusual for a grandparent to be closer to some grandchildren than others, but when you are gifting assets, unequal treatment among grandchildren could lead to family resentments. Even if you give more to some than others during your life, consider treating all grandchildren equally in your estate plan.

Taxes. With the federal gift tax threshold at $11,200,000 per person (double that for married couples), most people won’t have to worry about paying federal gift taxes. However, any gift to an individual that exceeds $15,000 each year per done ($30,000 for married couples) must be reported on a gift tax return.

Education. You can help with a grandchild’s college tuition by making payments directly to their educational institutions, which don’t have to be reported. And there is no limit on these contributions. Investing in a 529 plan for each of your grandchildren is also a great way to help them (and their parents!) save for college, building a tax-deferred account that will never be taxed as long as it is used for educational purposes.

Your own needs. It’s tempting to be too generous in making gifts to grandchildren, but you should not give to the detriment of your own needs. Finding the right balance will help ensure your children and grandchildren don’t have to support you because you gave too much to them.

Long-term care. Chances are that you will need some kind of long-term care at the end of your life, research shows that most of us will. If you can’t afford long-term care and need help, any gift of assets you have given could make you ineligible for Medicaid benefits for five years.

Consider a trust. There are many reasons why you should not give gifts of cash or assets to grandchildren, some that you may not even be aware of. Lots of cash could be fuel on the fire of bad behavior or undermine your own children’s goals for their children. To make a lasting gift, consider using a trust that will pass assets along to grandchildren safely and protect those assets from bad behavior, bad marriages, and bad credit.

One of the main goals of our law practice is to help families like yours plan for the safe, successful transfer of wealth to the next generation. Call our office today to schedule a time for us to sit down and talk about your estate plan, where we can identify the best strategies for you and your family to ensure your legacy of love and financial security. Our office is located in Santa Ana, CA but we serve all of California including Irvine, Orange, Tustin, Newport Beach, and Anaheim.